UPDATE 1-Putin says gas crisis could yet hurt Russia

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MOSCOW, Oct 20 (Reuters) - The European gas crisis can yet bite Russia, President Vladimir Putin said on Wednesday, should soaring prices feed into inflation, further boosting the cost of essentials such as food, or reduce demand for the fuel which is a key source of state revenue.

Spot European gas prices have risen fivefold since the start of the year with global demand outstripping supply as economies recover from pandemic-induced slowdowns. That has prompted some electricity generators to switch to burning coal, despite higher harmful carbon dioxide emissions.

“This has certain consequences for us, too,” Putin told senior government officials. “If there is a fall in demand...this would affect our producing companies including Gazprom.”

Gazprom, the sole gas pipeline exporter from Russia, is a cornerstone of the Russian economy along with oil producers led by state giant Rosneft.

There are no signs that demand and supply on the European gas market would be in balance in the short-term, Deputy Prime Minister Alexander Novak told the same meeting.

Putin said higher gas prices could also cause fertiliser prices to spike which, in turn, would add to already higher food costs. Inflation in Russia has recently accelerated to 7.63%, its highest level since February 2016.

“We are not interested in an endless increase in energy prices, including for gas,” said Putin, who has recently ordered another $420 million in social support payments be made to Russian households to help cope with the rising prices.

On Wednesday, he also ordered his government to come up with measures to protect local agriculture producers which should help curb food prices.

The Russian central bank is widely expected to hike its key rate for the sixth time this year on Friday as inflation runs well above its target of 4%. (Reporting by Vladimir Soldatkin and Oksana Kobzeva; Writing by Alexander Marrow and Katya Golubkova Editing by Kirsten Donovan)